December 11, 2013
POSTAL SERVICE TO GO PUBLICFriday, September 13, 2013
Britain confirms plans to privatize Royal Mail
Staff look set to strike after unions, Labour opposition voice resistance to move
LONDON — Britain’s coalition government has confirmed plans to privatize the country’s iconic 497-year-old state-owned postal service, Royal Mail, a move fiercely opposed by postal unions who have already suggested they will hold rolling strikes over the sell-off. The sale would be one of the most significant privatizations in Britain since the 1990s.
The Department for Business said a stock market flotation would take place in coming weeks, giving the public a chance to buy into the company. In the largest giveaway of any major UK privatization, 10 percent of the shares will go to 150,000 Royal Mail staff. Officials say the expected stock sale will be open to members of the public and larger institutional investors. The minimum investment will be set at £750 (US$1,185).
The Conservative-Liberal Democrat coalition government said the size of the sale would depend on market conditions, although it intends to dispose of a majority stake. Analysts say the float could value Royal Mail at between £2-3 billion (US$3 to US$4.7 billion).
“These measures will help ensure the long-term sustainability of the six-days-a-week, one-price-goes anywhere universal postal service,” Business Secretary Vince Cable said, predicting a “healthy future” for the company.
But unions and the Labour opposition slammed the move. Ian Murray, business spokesman for the opposition Labour Party, accused the government of a “politically motivated fire sale.”
“The Royal Mail is a much-cherished national institution,” he told MPs in the House of Commons.
“The case for privatization has not been met. With recent annual profits of over £400 million, we should be allowing it to flourish in the public sector.”
Deputy General Secretary Billy Hayes of the Communication Workers Union (CWU), said Royal Mail’s workers would not stand by and watch “people in the City and the board make a killing.”
He argued that the sale was not for the good of the company and would hurt workers’ pay and conditions, blaming “vested interests of government ministers' mates in the City.”
In ominous words, he said that strike action looked “more likely than ever.”
Even as the announcement of the IPO was made, the CWU was planning to ballot workers for possible strike action. The union is opposed to the stock plan because of fears of potential job losses. Concerns rose yesterday that the threat of industrial action could damp demand for the stock.
The landmark privatization spells a major change for the long-established mail service. Its familiar red pillar boxes will be protected by law, but tampering with a service so central to public life is also a delicate matter.
Even the late Margaret Thatcher, who championed the sale of state-owned companies such as British Telecom and British Gas, backed away from privatizing Royal Mail during her tenure as prime minister in the 1980s, famously saying she was “not prepared to have the Queen’s head privatized.”
The sale plan is be the fourth time Britain has tried to take Royal Mail public, after three attempts failed in the last 19 years due to opposition from within the governing majority, which feared an electoral backlash from tampering with a revered institution whose red post-boxes are known around the world.
Both Labour and the Conservatives looked into the issue in the 1990s but pulled out of the plans. The sale was eventually legally approved by Parliament in the 2011 Postal Services Act.
MODERNIZE AND COMPETE
The government said yesterday the privatization would allow the Royal Mail to tap investment that it needs to modernize and to compete in areas such as parcel delivery — which is becoming a major source of revenue as letter volumes decline with the growing use of email.
However, the move does not have popular support. A YouGov poll, published in July, showed that 67 percent of the public oppose the sell-off, with only 20 percent in favour. The poll showed that Labour and Liberal Democrat supporters were strongly against privatization, while Conservative voters were also opposed, but less fiercely.
Business minister Michael Fallon said yesterday that privatization would “give Royal Mail the commercial freedom it needs to succeed in a fully liberalized, competitive market.”
The government added that the Post Office, which runs the nation’s network of postal counters and was split off from the Royal Mail last year, was not for sale.
Fallon, who is heading up the sale of, said yesterday there was sufficient investor demand to push forward with the float and dismissed the chances of a possible postal strike derailing the plans.
The CWU, which represents most of the delivery service’s 150,000 staff, will send out strike ballot papers next Friday if an agreement cannot be reached with Royal Mail over post-privatization pay and conditions.
The CWU has previously argued that privatization — as well as affecting workers — will lead to a poorer service, claims the government denies. Fallon took to the airwaves yesterday to say that current services would remain the same for customers.
“The six day a week service that we all rely on and that businesses rely on, that is absolutely protected... and there is going to be no change to that,” Fallon told BBC radio.
Hayes, speaking yesterday, put pressure on Labour to formalize its commitment to a nationalized postal service. “We remain convinced that privatization is the wrong decision for Royal Mail... we want a commitment that a Labour government would renationalize Royal Mail,” Hayes said.
Royal Mail has revenue of over £9 billion and more than doubled operating profit in the year ended March 31 to £403 million pounds, helped by a greater focus on parcels, which make up almost half its turnover.
In response to falling letter volumes, the firm has shed 50,000 jobs in the past decade and shut around 25 mail centres.
The iconic postal service can trace its history back to 1516, when King Henry VIII established a “Master of the Posts.” The service was first offered to the public by King Charles I in 1635. Interestingly, at that time, the recipient was the one who paid the postage costs, not the sender.
Herald with YouGov, AP, Reuters